The GB path to market liberalisation

1. The GB path to market liberalisation Nigel Sisman sisman energy consultancy ltd TRGas Hub Project, Royal Garden Hotel, Kensington, London, 26 June 2014

2. The Sisman slide?

3. A personal experience

4. The GB Transmission System

5. The GB Distribution Systems

6. British Gas Yesterday On shore Development Gas Scheduling Gas Purchase Consumers Marketing Invoicing Producers Storage Supply Transmission Distribution Integrated Monopoly “The gas business is a natural monopoly”

7. The Development of Competition Reduction in Competitive threshold Completion of Domestic Competition Gas Act Separation of British Gas businesses First Transportation Arrangements The Network Code 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Reform of Gas Trading Arrangements Revised Gas Act Office of Fair Trading (OFT) Review MMC Report Demerger of British Gas MMC Report

8. The Development of Competition Gas Act 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 “Business as usual (but without government interference)”

9. The Development of Competition Gas Act 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 MMC Report “The first crack in the dam”

10. The Development of Competition First Transportation Arrangements Gas Act 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 MMC Report “A small price to pay”

11. The Development of Competition Changes insufficient to encourage self-sustaining competition Gas Act First Transportation Arrangements 1991 1988 1998 1999 1986 1990 1992 1993 1994 1995 1996 1997 Office of Fair Trading (OFT) Review MMC Report “negotiating at gun point”

12. Death of an industry?

13. The Development of Competition Reduction in Competitive threshold Gas Act First Transportation Arrangements 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Office of Fair Trading (OFT) Review MMC Report “Let the floodgates open ...”

14. The Development of Competition Reduction in Competitive threshold Gas Act First Transportation Arrangements 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Office of Fair Trading (OFT) Review MMC Report MMC Report “Here we go again …”

15. The Development of Competition British Gas Transco Public gas supply Contract Trading Reduction in Competitive threshold Separation of British Gas businesses Gas Act First Transportation Arrangements 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Office of Fair Trading (OFT) Review MMC Report MMC Report “a new organisation to meet the new challenge”

16. Suppliers Shippers The Development of Competition Reduction in Competitive threshold Gas Act Separation of British Gas businesses First Transportation Arrangements Transporter 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Revised Gas Act Office of Fair Trading (OFT) Review MMC Report MMC Report

17. The Development of Competition Reduction in Competitive threshold The Network Code Gas Act Separation of British Gas businesses First Transportation Arrangements 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Revised Gas Act Office of Fair Trading (OFT) Review MMC Report MMC Report “ the code, conceived in a hotel basement, is implemented”

18. DMDirect DM Supply Points NDM Supply Points LDZ LDZ National Balancing Point LDZ LDZ NBP Trading Exit Entry The Entry/Exit system “The network code and the NBP; the foundation for the competitive market”

19. STORAGE Traders Traders End Consumers Shippers Suppliers The Industry Players Producers Meter Beach Transporter

20. The Development of Competition Reduction in Competitive threshold Gas Act Separation of British Gas businesses First Transportation Arrangements The Network Code 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Revised Gas Act Office of Fair Trading (OFT) Review Demerger of British Gas MMC Report MMC Report

21. Demerger of British Gas British Gas Centrica plc BG plc Gas Supply Business Morecambe gas field Transco International and E&P “demerger to realise shareholder value”

22. The Development of Competition Completion of Domestic Competition Reduction in Competitive threshold Gas Act Separation of British Gas businesses First Transportation Arrangements The Network Code 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Revised Gas Act Office of Fair Trading (OFT) Review Demerger of British Gas MMC Report MMC Report

23. Domestic Supply Point “Switchers”

24. The Development of Competition Completion of Domestic Competition Reduction in Competitive threshold Gas Act Separation of British Gas businesses First Transportation Arrangements The Network Code 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Revised Gas Act Office of Fair Trading (OFT) Review Demerger of British Gas MMC Report MMC Report “Now it’s in millions”

25. The Development of Competition Reduction in Competitive threshold Completion of Domestic Competition Gas Act Separation of British Gas businesses First Transportation Arrangements The Network Code 1988 1998 1999 1986 1990 1991 1992 1993 1994 1995 1996 1997 Reform of Gas Trading Arrangements Revised Gas Act Office of Fair Trading (OFT) Review Demerger of British Gas MMC Report MMC Report

26. Conclusions • Liberalisation should not be confused with privatisation • Restructuring of the market: • to limit the power of incumbent monopoly • to unbundle contestable activities • Development of competition • third party access • introduction of market mechanisms • Transporter is a key enabler • Must be willing • Has to accept commercial consequences • Fair, balanced regulation is essential • Incumbents must wake up to the reality

27. Nigel Sisman sisman energy consultancy ltd 43 Poolfield Drive Solihull United Kingdom B91 1SH Email: nigel@sismanenergyconsultancy.co.uk Tel Office +44 121 704 1630 Mobile +44 7778 030716